A mechanics lien is arguably the most effective way to claim unsettled payment for construction work. When you file a mechanics lien against a property, your payment claim becomes public information that deters potential buyers and financiers from buying or funding it. This gives property owners more reason to settle outstanding debts, including the compensation that you worked hard for.
As in most states, filing a mechanics lien in Arizona is a process that must be taken seriously. There are requirements that you must fulfill if you want your lien claim to be valid, and there are also procedures to follow even after your mechanics lien has been satisfied.
This guide will walk you through the process of filing an Arizona mechanics lien, from filling out the mechanics lien form to releasing your mechanics lien.
- Who can file a mechanics lien in Arizona?
- Preliminary notice in Arizona
- How to file a mechanics lien in Arizona
- Arizona stop notice
- Important deadlines in filing an Arizona mechanics lien
- Best practices when recording a mechanics lien in Arizona
Who can file a mechanics lien in Arizona?
Almost all construction professionals who furnish “professional services, materials, machinery, fixtures, or tools in construction” have a right to record an Arizona mechanics lien. These include contractors, subcontractors, and material suppliers.
However, there are notable provisions that certain parties must meet in order for them to have lien rights:
• Contractors must have a valid license to practice in Arizona
• Construction parties working for an owner-occupied residential project must have a written contract with the property owner
• Professionals like consultants and designers must have a written or oral agreement with the property owner, general contractor, architect, or engineer
Preliminary notice in Arizona
All construction professionals who have lien rights in Arizona must serve a 20-day preliminary notice. Serving this notice is a requirement for a subsequent mechanics lien to be valid.
When to serve an Arizona preliminary notice
The 20-day preliminary notice must be served no later than 20 days after you first furnish labor or materials to a project.
Whom to send an Arizona preliminary notice to
The notice must be sent to the property owner(s), general contractor, construction lender, if applicable, and to the party who directly hired you, if applicable.
How to serve an Arizona preliminary notice
According to Arizona Property Lien Statues Section 33-992.02(F), your preliminary notice may be served by first-class mail sent with a certificate of mailing, registered or certified mail, postage prepaid in all cases.
Note that the notice is considered served at the time of mailing. Also keep in mind that you must keep all the documentation in order to prove that you have complied with this requirement.
Consequence of failing to serve an Arizona preliminary notice on time
Failing to serve the Arizona preliminary notice within the prescribed 20-day time window will not automatically revoke your lien rights. However, your mechanics lien will only be valid starting from the previous 20 days of the time of mailing.
Make sure that you comply with the preliminary notice requirement in Arizona if you want your entire work to be protected by a mechanics lien.
How to file a mechanics lien in Arizona
1. Ensure that you have lien rights
Filing a mechanics lien begins with making sure that your lien rights are protected. This is done by making sure that you have complied with the 20-day preliminary notice requirement in Arizona, and that you have done so on time.
Contractors must make sure that they have a valid up-to-date license to practice in Arizona. Their mechanics lien may be questioned if you do are not fully licensed to practice in the state.
Parties working on owner-occupied residential properties must make sure that they secure a written contract with the property owner before they begin working. The same applies for all other professionals such as architects and designers – they should try to sign a formal contract with a higher-tier construction stakeholder to strengthen your lien rights.
2. Prepare the mechanics lien form
Your Arizona mechanics lien form – also known as Arizona Notice and Claim of Lien – must have the following information.
- The legal description of the property to be charged with a lien.
A simple physical address will not suffice in Arizona – you must provide a legal property description in order for you mechanics lien claim to be valid. You may conduct your own search for the property’s legal description, including reaching out to the property owner or your general contractor, if applicable.
Note, however, that if your mechanics lien contains a wrong or incorrect legal description, your entire lien claim may be revoked. Make sure that you practice due diligence in researching the correct legal property description.
- The name of the owner or reputed owner of the property concerned
This is the name of the owner of the property. If there are multiple owners, write all their names. You may also conduct your own research to ensure accuracy of this detail, and you may do so by reaching out to your general contractor and requesting for this information.
- The name of the person who hired you
This is the name of the party who directly hired you. Make sure that you spelled their names correctly. If your employer is a business entity, make sure that you include their complete business name including the suffixes (e.g. Ltd., Inc.). A simple typo error on this item may prove fatal to your mechanics lien claim.
- A statement of the terms, time given and conditions of the contract, if it is oral, or a copy of the contract, if it is written
If you have only an oral agreement with your employer, provide a brief description of the services that you were expected to furnish, the time frame that you have agreed on, and other relevant conditions.
If you have a written contract with your employer, provide a copy of the written contract.
- The amount of your demand
This is the lien amount, and it must exclude attorney costs and other expenses that are not related to the payment for the services you provided to a property. Ideally this should reasonably match with the amount that you and your employer initially agreed upon.
- The date of project completion
According to Arizona Property Lien Statutes § 33-992.01(C1), project completion date refers to the earlier of the two dates:
o 30 days after final inspection and written final acceptance by the governmental body which issued the building permit
o Cessation or end of labor for a period of 60 consecutive days, except when cessation of labor is due to strike or shortage of materials
If no building permit is issued or if there are no final inspections or written final acceptances, project completion happens on the last date on which you furnish labor or services to a project.
- The date the 20-day preliminary notice was given
This date must be accompanied by a copy of the 20-day preliminary notice that you served and the proof of mailing from the post office.
Must an Arizona mechanics lien be notarized?
Yes, so make sure that you have your completed mechanics lien form notarized by a qualified officer. Do not sign your document without the presence of a notary officer.
3. Record the mechanics lien
Once you have your Arizona mechanics lien form ready, you may now have it recorded in the local county recorder’s office where your project is located. Make sure to bring at least two copies of your mechanics lien: one is for the office’s records, the other is for the property owner.
When to record an Arizona mechanics lien
Your Arizona mechanics lien must be filed within 120 days of project completion if no Notice of Completion was recorded by the property owner. If a Notice of Completion is available, you must file your mechanics lien within 60 days of the date the notice was recorded.
Note that the property owner is mandated to serve you a copy of the Notice of Completion within 15 days of its recordation date, provided that you have sent them a preliminary notice. If they do not serve you a copy of the Notice of Completion, your deadline stays within the 120-day window.
Should you serve a copy of your recorded mechanics lien to the property owner(s)?
Yes, you must, although the Arizona statutes do not have a specific deadline set for this requirement. The law requires that you serve a copy of the lien on the property owner “within a reasonable time” after recording it. It is best practice to serve it as soon as possible.
4. Enforce/release the mechanics lien
Once your mechanics lien has been recorded and copies of it have been sent to property owners, the next step is to wait. Two possible results can come up: either you get paid or you don’t.
If you receive the payment, this means that your mechanics lien has been satisfied. Arizona requires you to release or cancel the lien within 20 days of lien satisfaction. You must return to the county recorder’s office and record a lien release before this 20-day window elapses, otherwise you may be required to pay $1,000 to the owners on top of other lien-related damages.
If you do not receive the payment, make sure that you enforce your mechanics lien within 6 months of the day you recorded it. Your lien will expire after this 6-month period, which means that you may no longer be able to recover payment through the lien process.
Enforcing an Arizona mechanics lien requires initiating a lawsuit against the property owners. If your foreclosure lawsuit is successful, the property may be seized and sold, and you may receive your payment from the proceeds of the property’s sale.
Arizona stop notice
Arizona is one of the states that allow the service of a stop notice, a document that instructs the financier of a construction project to freeze the release of funds. If you serve a Stop Notice on a construction lender, for example, the lender may stop disbursing money to an owner or a general contractor, which may force them to settle their debt with you.
Serving a stop notice may be helpful, but it’s not always effective. It only works for funds that are yet to be released; if a lender or a property owner has already disbursed all the money, your stop notice does not do anything.
Furthermore, a stop notice does not get attached to a property. Potential buyers and financiers may offer funding fora project without any knowledge that there are outstanding debts related to it. Stop notices, in general, are not as effective as mechanics liens.
If you are in the middle of a payment dispute in Arizona, you are highly encouraged to still file a mechanics lien.
Important deadlines in filing an Arizona mechanics lien
Best practices when recording a mechanics lien in Arizona
1. Serve the preliminary notice as soon as possible
The 20-day preliminary notice is the most important step if you want to protect your lien rights. Even if you are given a 20-day window, you are advised to serve this notice as soon as possible. Do not wait until the 20th day before preparing and serving this notice.
Also note that you must keep copies of the Arizona 20-day notice as you will need them later on, if you ever need to file an Arizona mechanics lien. Also keep copies of the proof of mailing to make sure that you can prove your compliance to this requirement.
2. Make sure you have the correct legal property description
Arizona is one of the states that require a legal property description on a mechanics lien. A simple street address will not be sufficient, and an incorrect property description can result in the revocation of your mechanics lien.
You can send a request for this information to your general contractor or the property owner. You may also do your own research in your local recorder’s office to find out if they have this very important detail.
3. Release the mechanics lien as soon as it is satisfied
Arizona is one of the states in which a lien release is mandatory if a payment issue has been resolved. Do not wait 20 days before cancelling a lien. Waiting until the last day may introduce more complications, and failing to cancel a lien before the 20-day period may result in hefty penalties and fines.